2019 (8) TMI 1519 - AT - Central Excise

Clandestine manufacture and removal - Biscuits - absence of tangible evidences - Revenue was of the opinion that the Appellant had used 3,265 bags of unaccounted sugar, of which 875 bags had been seized and subsequently provisionally released, in the clandestine manufacture and sale of biscuits - HELD THAT - It is a settled law that the charge of clandestine removal is a serious one and has to be proved with the help of tangible evidence. In the instant case, there is a want of evidence with respect to the adverse findings against the Appellant that it utilized unaccounted stock of old sugar towards clandestine manufacture of biscuits. Such findings are neither supported by material proving unaccounted procurement of maida, ammonia, salt, flavours etc. nor flowback of funds in the Appellant s accounts. The purported buyers of such clandestinely cleared biscuits remained unidentified. Further, the Impugned Order has not dealt with the infrastructural incapability of the Appellant to manufacture such huge quantities of biscuits. We cannot appreciate the inconclusive investigations conducted by the Department or the impugned findings of the learned Commissioner suggesting that the charge of clandestine removal had been established. To take one instance the appellant had consistently maintained that it had possessed sufficient kadahis, chulahs, trays etc. required for mishri production and that these were minor value equipments which did not require much capital investment. Yet, no attempt was made by the Department to disprove such claims. A bald statement that kadahis, chulahs, trays etc. were not equipments for biscuits manufacture and that the appellant had failed to show records for purchase of the same cannot be countenanced - the finding in the impugned Order that the Appellant did not purchase Parel-G biscuits from M/s Maruti Foods has not been substantiated. Appeal allowed - decided in favor of appellant.

Summary

Issues Involved:
1. Allegation of clandestine manufacture and sale of biscuits using unaccounted sugar.
2. Confiscation of goods and imposition of penalties.
3. Verification of evidence and burden of proof.
4. Appellant's infrastructure and capacity to manufacture biscuits.
5. Appellant's explanation regarding mishri production and purchase of Parel-G biscuits.

Issue-wise Detailed Analysis:

1. Allegation of clandestine manufacture and sale of biscuits using unaccounted sugar:
The Revenue alleged that the Appellant used 3,265 bags of unaccounted sugar in the clandestine manufacture and sale of biscuits, resulting in a duty demand of ?71,24,068/-. The Appellant contended that the sugar purchased was old, moist, and discolored, unsuitable for biscuit manufacturing, and was instead used for making mishri. The Tribunal found that the Revenue failed to provide tangible evidence supporting the claim of clandestine manufacture, such as unaccounted procurement of other raw materials, flowback of funds, or transportation of clandestinely manufactured biscuits.

2. Confiscation of goods and imposition of penalties:
The Revenue proposed the confiscation of goods valued at ?9,79,573/- with an option to redeem on payment of a fine of ?2,44,894/-. The Tribunal noted that the confiscation was based on the assumption of clandestine manufacture, which was not substantiated by concrete evidence. Consequently, the penalties imposed under various provisions of the Central Excise Act 1944 were also deemed unsustainable.

3. Verification of evidence and burden of proof:
The Tribunal emphasized that the charge of clandestine removal is serious and must be proven with tangible evidence. In this case, the Revenue failed to provide sufficient evidence to support its allegations. The Tribunal observed that there was no corroboration of unaccounted procurement of raw materials, no adverse statements from transporters, and no evidence of undisclosed sale proceeds. The burden of proof, which lies with the Revenue, was not met.

4. Appellant's infrastructure and capacity to manufacture biscuits:
The Appellant argued that its factory lacked the infrastructure to manufacture the alleged quantity of biscuits. The Tribunal found that the Appellant's factory had only one baking oven capable of producing 1,600 to 2,000 kgs of biscuits per day, far less than the 22,000 kgs per day required to sustain the allegations. The Tribunal also noted that the consumption of electricity was consistent with the Appellant's stated production capacity.

5. Appellant's explanation regarding mishri production and purchase of Parel-G biscuits:
The Appellant maintained separate books of accounts for its Mishri Division, which recorded the purchase of old sugar stock, wastage, and production of mishri. The Tribunal found that the Appellant's records were consistent and had been verified during a sales tax assessment. The Appellant's explanation regarding the purchase of Parel-G biscuits from M/s Maruti Foods was corroborated by the supplier's statement and supporting documents. The Tribunal found no evidence to contradict the Appellant's claims.

Conclusion:
The Tribunal set aside the impugned order, finding that the Revenue failed to substantiate its allegations with tangible evidence. The appeal filed by the Appellant was allowed, and the penalties and confiscation orders were annulled. The Tribunal's decision underscored the importance of concrete evidence in proving charges of clandestine removal and highlighted the inadequacies in the Revenue's investigation and adjudication process.